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ULTIMATE HYPOCRISY: You can't 'naked short' certain equities, but 'Market Makers' can
- Thread starter ByLoSellHi
- Start date
Quote from riskfreetrading:
I think what you wrote is FALSE
Why? The number of shares sold short can be greater than the number of shares issued even if there is no naked short selling.
If SEC wants to devise a way to control the number of shares sold short with comparison to the number of shares issued/float, there there is a way to do it.
I know how to do it, and it is easy to implement.
Clue us in. Sounds interesting.
Quote from Maverick74:
It amazes me how people on this thread still don't understand the concept of short selling and naked short selling.
Let me try this one more time and let me keep the math simple. Say Company XYZ has 10 million shares in the float. Then hedge fund ABC comes along with the stock at $20 a share and decides to drive the stock to 0 after they have taken a legitimate short position of say 500k shares. So they go into the market place and sell 50 million shares. Now one of two things will happen. Either the stock will go to zero or someone will actually come in and be the counterparty to these sales. Now, let's say mutual fund DEF comes along and buys 50 million shares from fund ABC.
Now here is the question. What does DEF actually own. Assuming ABC was able to get off 10 million shares of available stock, where is the other 40 million coming from? Fund DEF doesn't own anything. They think they own 50 million shares of stock XYZ. But what they really own is 10 million shares of stock and 40 million shares of worthless paper. So now fund DEF requests the actual stock certificates and there are none to be had for the other 40 million shares.
Are you guys starting to see the problem now? What the f*ck did DEF buy? They wrote a check for 100's of millions of dollars to buy stock. But they only own 10 million shares, not 50 million!!!
It doesn't take a genus to see the danger on this and why the SEC requires the shares to actually be located within 3 trading days. If you guys still don't get it after this example, then it's pointless to really carry on this conversation.
Let me ask you this: if there is no naked short selling (let us assume it from a theoretical standpoint) do you think that the scenario you described will not arise? If you think that it will not arise, what is the proof? (theoretical proof not intuiton as intuition can mislead you).
Quote from ak15:
I am referring to the securities in question. There are too many variables involved to make sweeping generalizations about securities as a homogenous group.
While OSTK isn't one of the securities you are referring to I am sure Fly can point you to the reference where Patrick Byrne and his father bought a few million shares that they were unable to get delivery of long past the three day settlement period. If it can happen in OSTK and other stock no reason why any stock isn't vulnerable to these shenanigans.
Quote from Mvic:
Not sure if OSTK is one of the securities you are referring to but I am sure Fly can point you to the reference where Patrick Byrne and his father bought a few million shares that they were unable to get delivery of long past the three day settlement period.
I am referring specifically to the list of 19 major financial firms outlined by the SEC last tuesday:
* BNP Paribas Securities Corp.
* Bank of America Corp.
* Barclays PLC
* Citigroup Inc
* Credit Suisse Group
* Daiwa Securities Group Inc
* Deutsche Bank Group AG
* Allianz SE
* Goldman Sachs Group Inc
* Royal Bank ADS
* HSBC Holdings Plc ADS
* JPMorgan Chase & Co
* Lehman Brothers Holdings Inc
* Merrill Lynch & Co Inc
* Mizuho Financial Group Inc
* Morgan Stanley
* UBS AG
* Freddie Mac
* Fannie Mae
Quote from Bushido:
Totally agree with you there, as a matter of fact I am pretty sure there is a similar system followed on the exchanges in India.
Its as simple as the maximum open shorts cannot be greater than 92% of the OI.
Perfect! You've given the recipe to devalue the US equity markets and the dollar directly. Im not keen regarding India, but I do know 1USD=40+ ruppees, and very few public companies trading on BSE (not ADR) are valued in mid to high double digits when converted to USD.
According to Henry Blodgett circa 2007, Google is going to $2000.
Now it all makes sense.
Let's put lipstick on this pig.
Quote from 2ticks:
Perfect! You've given the recipe to devalue the US equity markets and the dollar directly. Im not keen regarding India, but I do know 1USD=40+ ruppees, and very few public companies trading on BSE (not ADR) are valued in mid to high double digits when converted to USD.
According to Henry Blodgett circa 2007, Google is going to $2000.
Now it all makes sense.
Let's put lipstick on this pig.
Frankly it was a comment on having other ways other than banning naked shorts completely... am i bothered with what happens in india.. not at all... as for the pig part... have we met...
also.. you wanna compare the sizes of the exchanges... you finally made me realize why it is still a third world country/emerging economy... oh wait you dint know about it till now did you..
i dont want to even go into the currency value I dont see it appreciating much... and thats not my area to comment on at all...
but one thing I would request you to do is explain how: the recipe devalues the US equity markets and the dollar directly. There are two possibilities... you'll either be able to explain it... i will applaud your intelligence and knowledge and that will be the end... or you are gonna prove the exact opposite and I will anyways not give a damn about an imbecile and a "troll".
Cheers!!
Bullshito
Limiting shorts to 92% or whatever of outstanding and issued shares would devalue the market: THINK YOU DILLWEED! Already authorized shares get issued. Then authorized shares get upped. The percentage of allowed short stays static, actual number of short shares increases. Dilution and base currency issues rule the day. And shorts still get shares. A round of forward splits is just what the market needs. :eek:
fwiw, I don't give 2ticks wtf you think of me. And I don't need no stinkin reply for me to KNOW what I think of you.
Limiting shorts to 92% or whatever of outstanding and issued shares would devalue the market: THINK YOU DILLWEED! Already authorized shares get issued. Then authorized shares get upped. The percentage of allowed short stays static, actual number of short shares increases. Dilution and base currency issues rule the day. And shorts still get shares. A round of forward splits is just what the market needs. :eek:
fwiw, I don't give 2ticks wtf you think of me. And I don't need no stinkin reply for me to KNOW what I think of you.
Quote from 2ticks:
Bullshito
Limiting shorts to 92% or whatever of outstanding and issued shares would devalue the market: THINK YOU DILLWEED! Already authorized shares get issued. Then authorized shares get upped. The percentage of allowed short stays static, actual number of short shares increases. Dilution and base currency issues rule the day. And shorts still get shares. A round of forward splits is just what the market needs. :eek:
fwiw, I don't give 2ticks wtf you think of me. And I don't need no stinkin reply for me to KNOW what I think of you.
Interesting thought. One might be able to make a case that naked shorting helps bring price efficiency.
If a shorting limit was 92% I can understand how your theory makes sense. OTH, we could reach a static limit on the number of shares short based on current shares issued this would give a market based priced to any stock.
We could have an example of a poor company that refuses to fall further in price because no more shorting is allowed, hence a naked short would bring discovery. The longs are misled on value but why sell? The allowable short interest is the floor.
At this particular time, knowing what I know, and what you do not, the Street is afraid of a 'melt up', which would wipe out whatever pitiful equity they currently have. And remember, as was pointed out to me yesterday, there are so many more derivitives out there, that they really don't even know what it would take to cover everything that needed to be covered. As I think about this, and I see the drastic measures being taken behind closed doors, this eclipses the Bear debacle.
Now, you're thinking I'm really crazy, but the whole premise of Reg Sho was to ease in a solution so the market didn't melt up, and it is in an Sec press release from 2005. I believe it was the delicious Annette Nazareth who said, "this is just a ploy by people who want their stocks to go up." How un American! Wanted a stock to appreciate.
I spent this Sunday morning talking to a former stock loan guy. I don't make stuff up. We're screwed. The same stock is being lent out over and over. It's common knowledge, and it's why Chanos bitched last summer. He was complaining about high borrow fees for stock he knew they didn't have. But he 'borrowed ' it anyway. What a champion of justice.
I spoke with the Good Dr. Bryne yesteday. As full disclosure, we NEVER talk about Overstock. That is strictly off limits, and I would never ask anyway. However we were discussing a particular event that has terrible consequenses, and points out the fraility of this mess. It is reflected in his "DeepCapture" post. I'm the last guy to read a poem, much less 'Haiku', whatever Haiku is. But I understand what he's saying, and I understand why he said it:
Deep Capture: The Haiku
July 19th, 2008 by Patrick Byrne
The tail wags the dog,
The tail eats the dog, then the
Tail becomes the dog.
http://www.deepcapture.com
Oh. I'll tell you one I can tell you. He said for the first time since October, he listened to the speech he gave at deepcapturethemovie.com. He said it was a turning point in all this, as in the beginning, there was some rustling and uneasyness in the audience of 800. But at the end, they were all riveted. Of course, it was a well heeled Wall St audience, mostly value guys, who finally understood why they were seeing some of the manuevering they couldn't before explain.
Now, you're thinking I'm really crazy, but the whole premise of Reg Sho was to ease in a solution so the market didn't melt up, and it is in an Sec press release from 2005. I believe it was the delicious Annette Nazareth who said, "this is just a ploy by people who want their stocks to go up." How un American! Wanted a stock to appreciate.
I spent this Sunday morning talking to a former stock loan guy. I don't make stuff up. We're screwed. The same stock is being lent out over and over. It's common knowledge, and it's why Chanos bitched last summer. He was complaining about high borrow fees for stock he knew they didn't have. But he 'borrowed ' it anyway. What a champion of justice.
I spoke with the Good Dr. Bryne yesteday. As full disclosure, we NEVER talk about Overstock. That is strictly off limits, and I would never ask anyway. However we were discussing a particular event that has terrible consequenses, and points out the fraility of this mess. It is reflected in his "DeepCapture" post. I'm the last guy to read a poem, much less 'Haiku', whatever Haiku is. But I understand what he's saying, and I understand why he said it:
Deep Capture: The Haiku
July 19th, 2008 by Patrick Byrne
The tail wags the dog,
The tail eats the dog, then the
Tail becomes the dog.
http://www.deepcapture.com
Oh. I'll tell you one I can tell you. He said for the first time since October, he listened to the speech he gave at deepcapturethemovie.com. He said it was a turning point in all this, as in the beginning, there was some rustling and uneasyness in the audience of 800. But at the end, they were all riveted. Of course, it was a well heeled Wall St audience, mostly value guys, who finally understood why they were seeing some of the manuevering they couldn't before explain.